IHT implications - Asset ownership if one party build on jointly owned land

[gdcuk]

A father and son own a large property, with 20 acres of land, 50:50 tenants in common.

The son has used his own money (approx £600,000) to build a commercial property (for the son’s own business) on a portion of the land that they jointly own. The commercial property is currently valued around £900,000

They have no legal agreements in place concerning the new commercial property or land it is built on.

The father is old and unlikely to survive long.

First question is on legal ownership of the commercial property - if there’s no legal agreement for ownership of the property, it appears that it is a fixture of the land, as such would the father own 50% of the commercial property if HMRC were to view his estate from an inheritance tax perspective?

If so, would half of the build cost therefore be considered a gift (Potentially Exempt Transfer) from son to father?

[Lee Young]

In the absence of anything to the contrary father's land has been enhanced in value by the building and therefore when he dies it will be the enhanced value in his estate that will be subject to inheritance tax . Depending on the extent of his estate this might not cause too many problems and could even (for CGT purposes) be beneficial?